The first wave of Private Finance Initiative (PFI) projects being handed back to the public sector is well underway. After more than two decades of operation and maintenance under private management, hundreds of schools, hospitals and public buildings are now returning to public ownership.
We were pleased to represent the Scottish Prison Service in relation to the handback of HMP Kilmarnock in April 2024, the first PFI handback in Scotland. This handback was an excellent example of collaboration between the public and private sectors, with the Scottish Prison Service, the SPV and the FM contractor working together to ensure mutually beneficial outcomes. In practical terms, the success of this handback was supported by the establishment of a dedicated and fully resourced project management team by the Scottish Prison Service. This approach allowed for the swift resolution of outstanding issues which helped maintain momentum. Overall, this pathfinder project demonstrated how strong relationships can drive real and meaningful solutions.
More recently, in August 2025, we acted for the SPV on the Falkirk schools PFI project, known as the Class 98 contract. This was the first schools PFI project in Scotland to be handed back to the public sector. Going forward, we are advising NHS Lothian in relation to the handback of its PFI contract relating to the Royal Infirmary of Edinburgh.
All of these projects have helped to strengthen the breadth and depth of our expertise in relation to PFI handbacks.
Understanding the handback challenge
Every PFI handback sits at the intersection of long-term contractual obligations, changing infrastructure standards and relationships built over decades. With projects nearing the end of 20 to 30 year contracts, questions often arise over:
- The condition of assets and the contractual definition of 'good condition'.
- The calculation of residual liabilities and final payments.
- How to recover or share lifecycle costs.
- How to manage incomplete or outdated documentation and data systems.
Handled poorly, these issues can strain relationships and cause disputes that delay projects and increase costs. Handled well, they can establish a benchmark for collaborative transition and future resilience.
Challenges for the public sector
For public authorities, the handback moment represents both opportunity and risk. Their priorities include:
- Protecting value for money by ensuring that assets are returned in the agreed condition and that long-term maintenance obligations have been met.
- Managing information gaps where asset records or performance data may have been lost or fragmented over time.
- Avoiding disruption to essential services, particularly in healthcare and education where even short interruptions can have significant consequences for staff and service users.
- Building internal capacity, as many authorities must quickly rebuild the in-house expertise required to take control of complex assets.
We support public bodies by turning complex handback requirements into clear and actionable steps. This can include reviewing and interpreting contractual maintenance standards, planning asset condition surveys, and setting out the evidence needed to demonstrate compliance. We also advise on certification and verification processes and help clients identify documentation gaps early.
Challenges for the private sector
For private project companies, investors and operators, the focus is on fulfilling contractual obligations while safeguarding relationships and reputations. Common challenges include:
- Meeting contractual obligations by confirming that all maintenance, insurance and performance obligations have been met and evidenced.
- Resolving residual liabilities by settling unspent maintenance funds, completing outstanding works and closing out financial obligations.
- Maintaining cooperation, particularly when disagreements arise over asset condition, maintenance standards or final payments.
- Protecting future opportunities by delivering a transparent and professional handback process that supports strong relationships with public authorities and strengthens their position for future infrastructure projects.
Our team works closely with private sector clients to plan early, interpret obligations clearly and manage negotiations constructively. This reduces the likelihood of disputes and protects value as contracts conclude.
Bridging perspectives to build resilience
The first wave of PFI handbacks is highlighting how complex long-term partnerships can be and how much they rely on clear communication, shared understanding and forward planning.
For public authorities, the process brings the challenge of taking ownership of assets that must continue to perform safely and effectively for decades to come. For private partners, there is an obligation to ensure that transition happens smoothly, transparently and in line with agreed standards.
Successful outcomes depend less on negotiation and more on preparation, particularly on both sides developing a shared understanding of what ‘good’ looks like in practice. Our experience across both sectors enables us to anticipate risks early, manage communication sensitively and guide clients towards fair and sustainable outcomes.
As more projects reach maturity, the lessons learned now will influence how future partnerships are structured and managed. Every successful transition strengthens confidence in the model and helps both sectors build greater resilience in their assets, their relationships and their shared responsibility for public infrastructure.
